Fixed deposits (FDs) are very popular among risk-averse investors because of steady returns and guaranteed maturity value. As capital protection is the foremost priority for senior citizens, most of them prefer to park their money in FDs. As the rate of interest on FD remains the same for the investment period, it also protects investors from any fall in interest rates during the tenure for which the money is invested.
So, getting some extra rate in low-interest regime attracts investors who don’t want to wade through choppy capital markets for higher long-term returns. However, before investing in corporate FDs, investors should also check the credibility of the institution to ensure the safety of their funds.
Mahindra Finance, for instance, has come up with Corporate FD with interest rate of 8.85 per cent for normal citizens and 9.1 per cent for senior citizens.
Here are five reasons why you may consider to park your money in the FD of Mahindra Finance:
1. Higher interest rate
While scheduled commercial banks on an average offer interest rates of around 7 per cent for younger people and 8 per cent for senior citizens, the respective rates of 8.85 per cent and 9.1 per cent offered by Mahindra Finance surely look attractive to earn more money on the same investments. With the probability that the Reserve Bank of India (RBI) may lower policy rates further, investors would like to lock the higher rate for the opted investment period.
2. Good credit rating
The Mahindra Finance Corporate FD has a Crisil rating of ‘FAAA’, which indicates a high level of safety. So, apart from higher interest, higher rating also ensures safety of the principal amount.
3. Flexibility in choice
Investors have the flexibility in choosing the investment tenure as well as the option of getting the interest on FDs. While the rates of interest of 8.85 per cent (9.1 per cent for senior citizens) are offered on investment durations of 38 and 44 months, investors may choose if they want to get the interest on a regular basis or want the interest to get accumulated to earn a higher maturity value. In a ‘non cumulative scheme’ the interest is payable on a half yearly basis, while in case of ‘cumulative deposit scheme’, the interest is payable at the time of maturity along with the principal.
4. No market risks
The rate of return on FD remains constant for the tenure of investment and the maturity value is also guaranteed, unlike that of equity and equity-related instruments, where the capital invested itself fluctuates along the movements in stock markets. So, in FD, the value of investment will not go below the value of principal invested.
Although FDs have a fixed maturity period, but in case of emergency you may break the deposit by sacrificing some interests. Otherwise, you may also take loans against the FD, if you don’t want to break it prematurely.